Archive for September, 2010

Last week I attended a political meeting about local economic issues. Those present were predominantly right-leaning in their views and probably would identify themselves as conservatives or republicans. Consequently, I was surprised to learn that one of the items on the agenda was a proposal to entice a business into the city by using tax increment financing. Tax increment financing involves manipulating property taxes.

Property taxes are calculated as a percentage of the assessed value of the property. For example, if your property is worth $100,000 and your property taxes are 5%, then you have to pay $5,000 in property taxes each year. Normally, as the assessed value of a piece of property increases, the property taxes increase as well. So, if the value of your property increases to $200,000, then you would have to pay $10,000—assuming taxes stay at 5%.

Property taxes go into a pool of money which the city council then divides up among various local government services. These services include schools, police departments, fire departments, road maintenance, city government, and so on. Since no one likes to pay taxes, there is a natural tension between the desire for more of these services and the desire to lower property taxes. Consequently, city councils are limited in what they can afford to do. A city council that chose to raise taxes to build a new building for Walmart, for example, would probably become unpopular very quickly. The people’s natural aversion to being plundered helps restrain local government power. But like weeds growing up through the cracks in the sidewalk, creative government employees have found ways around this restraint. One of these is tax increment financing. Tax increment financing gives the city council significant power to influence development and business within the city.

Despite its technical-sounding name, tax increment financing is quite simple. It is just a way for the city council to spend future property tax revenue to promote or pay for present development projects. Usually, when property is developed, its assessed value increases. Normally, this would mean that the owner of the newly developed property would owe higher property taxes, which would help fund local government services. But tax increment financing changes this. Instead of going into the general city fund, the additional tax money is earmarked to pay for the development itself. Usually this means that the city borrows the money to pay for the development up front and then slowly pays off the loan with the additional property taxes from the developed property. Alternatively, the developer fronts the costs of the development and the city freezes the property taxes at the pre-development level for a time so that the developer can recoup development costs in the form of lower taxes. Either way, property taxes that would otherwise go into the general fund to pay for local government services are instead set aside to pay for the development.

Advocates of tax increment financing argue that it is a win-win situation for the city because it doesn’t use any money from the pre-existing tax revenue, and because, in the end, the city’s tax income will be higher than it was before the project. But even if true, these assertions don’t address the consequences to the rest of the city outside of the project area or the consequences to the rest of the economy.

City councils like tax increment financing because it expands their power; it allows them to pay businesses to relocate within city limits without having to raise property taxes. But when a city council uses tax increment financing to pay for an incoming business’ property development expenses, all other businesses are suddenly placed at a disadvantage. Essentially they must compete with a business whose real estate expenses are paid by the city government. Obviously any business in direct competition with the subsidized business will suffer, but other businesses will suffer as well as they compete—at a disadvantage—for high quality human capital and other scarce resources.

Other businesses aren’t the only ones negatively affected; all consumers of city services suffer. When a new business moves into the city, it uses city resources in the form of increased traffic, demand for police and fire department protection, parking, and general wear and tear. But if a new business moves in under the protection of tax increment financing, it doesn’t pay for these services through its property taxes. Consequently, other property owners must either pay more taxes or the city will have to divert funds from other areas.

But the most serious problem, in my opinion, is that tax increment financing gives the city council power to intervene in the city’s economic development. This increases the likelihood of malinvestment by distorting the market forces that prevent inefficient companies from consuming resources that they cannot afford, and it opens the door to corruption.

Conservatives across America are furious about bailouts and stimulus packages originating in Washington D.C.—as they should be. But to me it seems terribly inconsistent to rail against the D.C. bureaucrats for their intervention in economic affairs and yet support local politicians who intervene in fundamentally the same way on a much smaller scale. If we believe in economic liberty, then let’s apply it consistently.

The world is full of people with strange ideas. But despite society’s present obsession with diversity in race, socioeconomic background, gender, and sexual orientation in schools and workplaces—all of which are, at best, merely superficial signs of diversity—the modern state will not tolerate diversity in more fundamental areas, such as values. This is particularly evident in decisions concerning one’s life or the life of one’s children. In my previous post I wrote about laws which force parents to administer a medical test to their infant children. Advocates of these laws insist that the child’s life and health are of paramount value, and other considerations—including parental rights, moral beliefs, and individual liberty—must yield.

Our culture and history are full of stories about individuals who chose to value something more than life. Here are a few examples; I’m sure you can think of many more. Patrick Henry famously exclaimed, “give me liberty or give me death.” Christians, Jews, and Muslims all honor Abraham for valuing obedience to God more than his son’s life. Romantics treasure the story of Romeo and Juliette for valuing love over life. Even the academics have Socrates who insisted that “the unexamined life is not worth living.” Plato, Apology. When these individuals are safely pinched into stories and songs, society honors them as heroes, patriots, prophets, and so on. But when society deals with such diverse people in real life, it is much more inclined to label them as lunatics, fanatics, or simply ignorant, and to try to force them to conform their ideas and behavior to that of the majority.

Squelching diversity of values is one prerequisite for any utilitarian or economic analysis of the law. For example, in the recent healthcare debate, the contested issue became cost. Pundits and politicians focused on whether socialized health insurance would cost more or less than the current system. The President and his allies argued strenuously that they would control costs by appointing independent commissions and cutting spending in other programs. Opponents argued that this was not true. There was little said about anything else. Other values, such as property rights and freedom to choose the type and amount of healthcare, took second seat. This is a familiar maneuver: assume without discussion that one value takes priority over all others and then discuss the best way to promote that value. The deception here is that deciding which value to prioritize is often the most important and controversial issue at stake. It merits careful discussion and debate. Liberty, life, love, obedience, spirituality, individuality, human dignity, property; which should take priority, and who should decide? Anyone who values human equality must admit that this is an individual decision.

Liberty is the only value that the state can adopt and promote that will permit each individual to order her values as she chooses. Robert Nozick recognized this simple truth in his work Anarchy, State, and Utopia.

[P]eople are different. They differ in temperament, interests, intellectual ability, aspirations, natural bent, spiritual quests, and the kind of life they wish to lead. They diverge in values they have and have different weightings for the values they share. (They wish to live in different climates—some in mountains, plains, deserts, seashores, cities, towns.) There is no reason to think that there is one community which will serve as ideal for all people and much reason to think there is not. … Utopian authors, each very confident of the virtues of his own vision of its singular correctness, have differed among themselves (no less than the people listed above differ) in the institutions and kinds of life they present for emulation. … The conclusion to draw is that there will not be one kind of community existing and one kind of life led in utopia. Utopia will consist of utopias, of many different and divergent communities in which people lead different kinds of lives under different institutions. Some kinds of communities will be more attractive to most than others; communities will wax and wane. People will leave some for others or spend their whole lives in one. Utopia is a framework for utopias, a place where people are at liberty to join together voluntarily to pursue and attempt to realize their own vision of the good life in the ideal community but where no one can impose his own utopian vision upon others.

310-312 (1977). Despite its plain appeal, statists on both the left and the right resist real freedom because it would mean giving up the power they have usurped. Republicans want to control moral behavior and foreign affairs, while Democrats wish to usurp individual property rights and control citizens’ day-to-day living conditions. Both parties openly and subtly try to control the thoughts and speech of citizens through public education, campaign finance laws, and penalizing unpopular behavior.

Undoubtedly there is a fixed right and wrong. Truth is not relative. But if history and ethics have taught us anything, it is that people cannot be driven to the truth by threats and force. The use of force to suppress an idea—whether right or wrong—will only strengthen its power in the mind of its followers and spark curiosity in undecided onlookers. Conversely, the use of force to promote an idea will ultimately weaken it because it is a tacit admission that the idea cannot stand on its own merits. Teach, persuade, and reason, but don’t threaten or force people to support ideas or programs that you think are right—whether through coerced taxation or police enforcement or otherwise.

Ultimately, we each get to pick our own heroes and lunatics, and we’ll probably disagree a lot. But that should remain an individual judgment, not a judgment of the state.

A short time ago, my wife and I were blessed with the birth of our third child. Those who have had children recently may remember the extensive battery of medical tests that a hospital-born baby suffers through during the first days of life. Since my wife and I are not medical experts, we usually trust the attending doctors’ and nurses’ assurances that these tests are effective and helpful and that the benefits outweigh the risks. But after a conversation with one nurse, we had some concerns about the PKU test. The nurse advised us that the PKU test often had to be needlessly repeated because the maternity ward staff regularly performed the test too soon after birth—precluding reliable results. The PKU test, also called newborn screening, is unpleasant: a nurse cuts the baby’s heel with a razor blade and dabs blood on a card. So we thought it would be good to wait and have the test done only once.

Now, let me be clear that I don’t oppose PKU testing. Left perfectly free, I would probably still choose to have my children tested. From my layperson’s perspective, it seems to make sense: for the cost of a small cut and a couple of hundred dollars, the test can identify several devastating potential medical problems, some of which can be successfully treated. But some people, including some doctors, disagree. There is ongoing debate about what disorders the newborn screening should test for, and there is also disagreement about whether the disorders identified by the current tests are even treatable.

One critic, Norman Fost, professor of paediatrics and bioethics at the University of Wisconsin in Madison notes that when PKU screening was put into place more than 40 years ago it was assumed that if a child had high blood phenylalanine they had PKU and should be fed a strict diet. But there were few data to support that assumption, says Fost. “It turned out that 95% of people with an abnormal screening test had no disease, and it turned out the diet was lethal. It caused brain damage in we don’t know how many kids, and killed we don’t know how many kids.”

“They did not develop their arguments based on a careful analysis of the literature. The methodology is not strong” says Jeffrey Botkin, professor of paediatrics and medical ethics at the University of Utah in Salt Lake City, Utah. … The ACMG working group, he argues, did not provide data to show that kids will do better as a result of early intervention based on newborn screening.

The rules governing newborn screening provide, “Each newborn in the state of Utah shall submit to the Newborn Screening testing, except as provided in Section R398-1-11 [exception for religious objectors].” R398-1-3. To ensure compliance, medical providers are required to report parents who refuse the test. “If the medical home/practitioner or institution has information that leads it to believe that the parent or legal guardian is not complying with this rule, the medical home/practitioner or institution shall report such noncompliance as medical neglect to the Department.” R398-1-13 (emphasis added). If a medical provider fails to snitch on reluctant parents, she will be fined: “Any medical home/practitioner or facility responsible for submission of a newborn screen that violates any provision of this rule may be assessed a civil money penalty.” R398-1-18.

A report of medical neglect is no small matter. It falls under the general definition of “neglect” found in the Utah Code. “‘Neglect’ means: … (iii) failure or refusal of a parent, guardian, or custodian to provide proper or necessary subsistence, education, or medical care, or any other care necessary for the child’s health, safety, morals, or well-being.” 78A-6-105(25)(a) (emphasis added). A finding of medical neglect gives the state the power to take your kids away. “The court may terminate all parental rights with respect to a parent if the court finds … that the parent has neglected or abused the child.” 78A-6-507(1) (emphasis added). In my opinion, these laws are unjust. Laws which give government the power to take away a couple’s parental rights because they didn’t have their child tested for rare genetic diseases turn the proper relationship between citizen and government on its head.

Advocates of newborn screening trot out the usual wild rhetoric to justify this government-forced medical testing:

These are our children: the single greatest treasure we have as a nation and as a people. … Given the statistical prevalence of treatable metabolic disorders, not using MS/MS [an advanced newborn screening procedure] today to screen babies comprehensively is no different from shooting a gun into a crowded stadium. You cannot know whom you will injure, but it is a safe bet that you will injure someone.

Charles P. Hehmeyer, “The Case for Universal Newborn Screening,” Exceptional Parent Magazine, 88 (August 2001). The analogy to a gunman in a stadium is blatantly false. Someone who shoots at a group of people creates the risk of harm, but a person who declines a medical test simply fails to mitigate a pre-existing risk of harm. These acts are very different morally as well as legally. But even setting aside the blatantly false analogy, the argument fails. It rests on a false assumption. It assumes that children are a national resource to be guarded, guided, and regulated as the majority dictates. In fact, if children can be said to belong to anyone, they belong to their parents and themselves. Neighbors, friends, and community do-gooders have no rightful claim at all. (For a more detailed argument about this point, see my previous post: Whose Kids are They?)

Usually, a medical provider must obtain informed consent to perform any medical test or procedure. Usually, parents are the legal representatives of their children, and have the sole authority to consent or refuse. Newborn screening is a deviation from this usual practice. Consequently, some medical ethicists criticize mandatory newborn screening as unethical:

Does newborn screening policy take appropriate account of fundamental and widely respected American values concerning confidentiality, privacy, and informed consent? The mandatory nature of newborn screening seems inconsistent with these values. The standard rationale for mandating public health measures such as mandated immunization or treatment of infectious disease is that the measure will avert serious, imminent harm to others, but this rationale does not apply to newborn screening. Instead, the justification for requiring screening without parental informed consent has been that the risk is minimal and the child will lose a vital benefit if screening is not done immediately. Even under these circumstances, not all ethicists think that omitting informed consent is acceptable. Broadening the rationale makes the omission even more questionable. If the rationale is a family benefit, such as information that can inform reproductive decisions or help avoid diagnostic odysseys, or a societal benefit, such as identifying potential research subjects for the study of currently untreatable disorders, then the ethical requirement is clear: parents should be informed and allowed to make their own decisions.

Lately, political machinations at the national level have excited many people to become involved in protests and movements. This is good. But the reality is that the average citizen has far more control over state policy than over national policy. A little effort to move state policies in the direction of freedom can make a big difference. Mandatory newborn screening is a state program, so this is something we can fix. Regardless of whether you believe newborn screening is good for your own children, it should be clear that forcing others to adopt the same opinion violates individual rights and human equality.

When my wife and I decided to have a third child, we didn’t do so to provide another subject for the state or another unit in a managed population. We want our children to be free individuals, not children of the state.